Euro gains against Canadian Dollar following German data

EUR/CAD gains strength after Germany's October Manufacturing PMI was confirmed at 54.2, signaling robust expansion.
German Retail Sales plunged 2.0% MoM in September, missing expectations of a 0.4% gain as spending weakened.
Falling oil prices driven by OPEC+'s decision to hold December output targets steady could weigh on the Canadian Dollar.

EUR/CAD gains over 0.5% after registering modest gains the previous day, trading around 1.5680 during Asian hours on Monday. The currency cross rises as the Euro (EUR) remains stronger following the release of German economic data.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The S&P Global Germany Manufacturing PMI was confirmed at 54.2 in October, the second-highest for almost four-and-a-half years, just behind August's recent peak, and compared to 53.9 in September. German Retail Sales, a key measure of consumer spending, dropped by 2.0% MoM in September, compared to a rise of 1.2% in August (revised from 1.3%). This figure came in weaker than the market expectations of a 0.4% rise. On an annualized basis, Retail Sales came in at -2.3% in September, versus a 0.3% decline prior (revised from -0.4).

The EUR/CAD cross rises as the commodity-linked Canadian Dollar (CAD) could face headwinds from falling oil prices. Crude prices declined following an agreement by OPEC+ to maintain steady oil production targets for December, keeping required production at September levels. Under this arrangement, Saudi Arabia’s allocation is set at 10.478 million barrels per day (bpd), followed by Russia at 9.949 million bpd and Iraq at 4.431 million bpd.

Meanwhile, crude oil prices also faced downward pressure as investors weighed ongoing diplomatic efforts to end the Middle East conflict against fears of renewed US military action against Iran. Qatari and Iranian officials continued their discussions for a third consecutive day, seeking an agreement to end the war ahead of the US midterm elections.

Energy surge compounds market stress as investors question AI trade

Strategists at Deutsche Bank highlight that the past month was marked by a confluence of pressures, as “investors grappled with mounting doubts around the AI trade, French sovereign stress, and higher energy prices.” In their review, they note that Brent crude “(+13.6%) extended its rise amid concerns over renewed US-Iran escalation,” underscoring how geopolitical tensions have fed directly into the energy complex. At the same time, European gas markets tightened, with “European natural gas [rising] above €100/MWh for the first time since 2022,” adding another layer of strain to an already challenging backdrop for risk assets.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.